martedì 4 settembre 2018

Monetary Lessons from the Not-So-Great Depression - The Real Problem was Nominal

Monetary Lessons from the Not-So-Great Depression (Cato Unbound Book 92009)
Jeffrey Rogers Hummel, Scott Sumner, George A. Selgin, James D. Hamilton, and Will Wilkinson
Last accessed on Monday September 3, 2018
80 Highlight(s) | 80 Note(s)
Yellow highlight | Location: 62
The Real Problem was Nominal
Note:@@@@@@@@

Yellow highlight | Location: 65
resources of monetary policy were not exhausted,
Note:PUNTO DI PARTENZA

Yellow highlight | Location: 66
Sumner maintains that monetary policy in the run-up to the finacial crisis was not highly expansionary,
Note:CONTRO L OPINIONE GENERALE

Yellow highlight | Location: 73
important flaws in modern economic theory.
Note:OPINIONE COMUNE DOPO LA CRISI

Yellow highlight | Location: 80
it appeared as if modern macro offered no solutions. Thus policymakers turned in desperation to old-fashioned Keynesian fiscal stimulus,
Note:RITORNO AD IDEE GIÀ SCREDITATE NEGLI ANNI OTTANTA

Yellow highlight | Location: 82
first recognizing that the proximate cause of the crash was not a financial crisis, but rather a steep decline in nominal spending.
Note:PRIMA COSA DA FARE

Yellow highlight | Location: 83
a failure of monetary policy.
Note:DI FATTO

Yellow highlight | Location: 85
an intellectual failure by well-meaning public servants and the academic economists who advise them.
Note:CHI HA FALLITO

Yellow highlight | Location: 86
crisis resulted not from a failure of modern macroeconomics, but rather a failure to take seriously some of the most promising recent developments in the field.
Note:SINTESI

Yellow highlight | Location: 87
A Very Brief History of Monetary Economics
Note:Tttttttttt

Yellow highlight | Location: 89
the quantity theory of money,
Note:1700… DAVID HUME

Yellow highlight | Location: 91
Hume even understood that a change in the velocity of money had an identical effect to a change in the money supply:
Note:VELOCITÀ

Yellow highlight | Location: 94
(M*V = P*Y),
Note:4 VARIABILI

Yellow highlight | Location: 95
In the long run the effects of diminished nominal spending show up in the form of lower prices, but in the short run output would also fall.
Note:L AGGIUSTAMENTO

Yellow highlight | Location: 98
Hume had the answer
Note:TEORIA Q

Yellow highlight | Location: 99
but Milton Friedman made a similar observation in 1975 regarding the Phillips Curve:
Note:ANCHE MF ERA ARRIVATO

Yellow highlight | Location: 103
Today we think in terms of unanticipated changes,
Note:DOVE ABBIAMO SUPERATO F.

Yellow highlight | Location: 105
Between the early 1990s and 2007, NGDP grew at just over five percent per year.
Note:ESEMPIO

Yellow highlight | Location: 107
the decline in NGDP during 2009 is likely to be the steepest since 1938.
Note:NDGO 2009

Yellow highlight | Location: 108
This produced what may end up being the deepest and most prolonged recession since 1938.
Note:CONSEGUENZA

Yellow highlight | Location: 114
The “real problem” was obviously the financial crisis, and NGDP fell as a consequence.
Note:L OBIEZIONE A QS RICOSTRUZIONE

Yellow highlight | Location: 115
Monetary policy was obviously highly expansionary,
Note | Location: 115
ALTRA CREDENZA DIFFUSA

Yellow highlight | Location: 119
monetary policy was not “easy” but rather was highly contractionary in the only sense that matters, that is, relative to the stance expected to hit the Fed’s implicit nominal targets.
Note:XCHÈ LA POLITICA MONETARIA FU RESTRITTIVA

Yellow highlight | Location: 122
Wicksell argued that central banks should adjust the interest rate on short-term loans as needed to stabilize the price level.
Note:TRA HUME E FRIEDMAN

Yellow highlight | Location: 124
in a depressed economy with falling prices the natural rate might become negative.
Note:IL CONTRIBUTO DI KEYNES

Yellow highlight | Location: 126
He called this scenario a “liquidity trap.”
Note:Cccccccc

Yellow highlight | Location: 127
The monetarists recommend “quantitative easing,” or injecting more cash into the economy than the public wishes to hold.
Note:LA RICETTA MONETARISTA X USCIRE DALLA TRAPPOLA

Yellow highlight | Location: 130
it is always possible to produce inflation by lowering the price of money either in terms of a commodity like gold or in terms of foreign exchange. This was the approach used by FDR in 1933,
Note:APPROCCIO ALTERNATIVO DI VFDR

Yellow highlight | Location: 135
Much of recent macro theory has focused on showing how and why monetary policy can be highly effective in a liquidity trap. Thus I was quite surprised to observe the general sense of powerlessness
Note:DI STUCCO

Yellow highlight | Location: 139
almost all of the attention was focused on fiscal stimulus.
Note:PURTROPPO

Yellow highlight | Location: 141
Frederic Mishkin says: “Monetary policy can be highly effective in reviving a weak economy even if short-term interest rates are already near zero.”
Note:FM

Yellow highlight | Location: 143
Misdiagnosing the Stance of Monetary policy
Note:Tttttttt

Yellow highlight | Location: 144
Twentieth-century macroeconomics reached its nadir in 1938,
Note:QUANDO IL ZERO BOUND FECE DISPERARE SULLA POLITICA MONETARIA

Yellow highlight | Location: 145
Keynes had argued that monetary policy could only impact demand by changing interest rates,
Note:LA CREDENZA DI ALLORA

Yellow highlight | Location: 146
Joan Robinson drew the logical implication that easy money couldn’t possibly have caused the German hyperinflation, as interest rates were not particularly low.
Note:EFFETTI DELLERRORE KEYNESIANO

Yellow highlight | Location: 149
interest rate is a good indicator of the stance of monetary policy.
Note:LA CREDENZA IN ALTRE PAROLE

Yellow highlight | Location: 151
The second most common rationale for believing money was “easy” was to point to the huge expansion of the monetary base that began in the fall of 2008.
Note:ANCHE LA BASE MONETARIA NN È N BUON ONDICATORE

Yellow highlight | Location: 153
Friedman and Schwartz showed that money was very tight during the early 1930s, and yet the monetary base rose sharply during that period.
Note:ESEMPIO STORICO

Yellow highlight | Location: 157
paying interest on reserves was called a “confession of contractionary intent”
Note:CONFESSIONE

Yellow highlight | Location: 159
the broader aggregates
Note:ALTRO INDICATORE NN VALIDO

Yellow highlight | Location: 161
false alarms about high inflation.
Note:SE GUARDIAMO ALL AGGREGATO....UN PUNTO DEBOLE DEL MONETARISMO TRADIZIONALE

Yellow highlight | Location: 162
Late in his life even Milton Friedman suggested that it might be better for the Fed to target inflation forecasts.
Note:IL CAMBIO DI MF

Yellow highlight | Location: 166
all our models, data, and analysis and experience for the last 40 years say fiscal stimulus doesn’t work,
Note:COCHRAN SUL FISCAL STIMULUS

Yellow highlight | Location: 167
How can a scientist “believe” something different than what he or she spends a career writing and teaching?
Note:MISTERO

Yellow highlight | Location: 181
the market expectation for inflation and NGDP growth over the following 12 months had fallen far below any plausible estimate of the Fed’s implicit target.
Note:TUTTI DISTRATTI DAL CHE FARE CON LE BANCHE

Yellow highlight | Location: 183
Many economists associate a loss of monetary credibility with high inflation, not excessively low inflation.
Note:ADDIRITTURA

Yellow highlight | Location: 186
many economists assumed that the financial crisis was causing the decline in aggregate demand, whereas the reverse was more nearly true.
Note | Location: 186
ALTRO DIVERSIVO

Yellow highlight | Location: 187
monetary policy almost never appears to be the cause of deflation
Note:PURTROPPO

Yellow highlight | Location: 191
A fourth problem was that many economists focused on inflation, whereas NGDP growth is a far more revealing indicator of deflationary policies.
Note:ALTRO PROBLEMA

Yellow highlight | Location: 196
because many wages and prices are very sticky, a deflationary monetary policy may affect output
Note:IL DRAMMA DELLA DEFLAZIONE

Yellow highlight | Location: 202
In my view, the expected growth rate in NGDP is the best indicator of whether monetary policy is too loose or too tight.
Note:ESPANSIVA O RESTROTTIVA

Yellow highlight | Location: 205
The most devastating demand shocks are those that change the expected trajectory of NGDP and inflation many years out into the future.
Note:È SUCCESSO NEL 1929 E NEL 2008

Yellow highlight | Location: 210
all sorts of indicators were signaling that money was too tight well before the failure of Lehman in mid-September.
Note:2008

Yellow highlight | Location: 212
Even in normal times going from five percent NGDP growth to a nearly five percent rate of decline would place a severe burden on banks.
Note:ALLARME ROSSO

Yellow highlight | Location: 219
Targeting the Forecast
Note:Tttttttttt

Yellow highlight | Location: 219
Lars Svensson has advocated a policy of targeting the forecast
Note:LA PEOPOSTA

Yellow highlight | Location: 221
Once one starts to think of monetary policy this way, any other policy seems unacceptable.
Note:L IDEALE

Yellow highlight | Location: 223
Ben Bernanke also seemed to find the logic of Svensson’s idea to be quite appealing,
Note:D ALTRONDE

Yellow highlight | Location: 230
it became apparent that the Fed’s forecast was well below any plausible target.
Note:MA LA FED NN FA PREVISIONI

Yellow highlight | Location: 232
In the standard new Keynesian model, where the central bank targets the inflation rate, there is no role for fiscal policy
Note:NEW K

Yellow highlight | Location: 237
Hetzel argued that the Fed was frightened by the high inflation rates in the “headline CPI”
Note:LE PAURE

Yellow highlight | Location: 244
Nevertheless, many monetarist insights became a part of the consensus new Keynesian model. Some of these were very valuable, ideas such as the importance of expectations, and also that monetary policy was more effective than fiscal policy.
Note:MONETARISMO => NK

Yellow highlight | Location: 246
the belief that any large increase in the money supply must inevitably be followed by high inflation.
Note:MA ECCO COSA FREGA MOLTI EX MONETARISTI

Yellow highlight | Location: 247
despite the fact that prices have trended downward in Japan since 1994, despite huge monetary injections.
Note:NONOSTANTE UNA LEZIONE STORICA

Yellow highlight | Location: 248
widespread belief in a mysterious “long and variable lags”
Note:PAURA DEL LAG

Yellow highlight | Location: 252
Modern macro theory suggests that what really matters is not a change in today’s money supply, but rather a change in the expected future path of money.
Note:CENTRALITÀ ASPETTATIVE

Yellow highlight | Location: 255
A sharp devaluation of the dollar would not have been appropriate in the second half of 2008, as much of the world faced the same problems. But we did need some type of credible policy of price-level or NGDP targeting.
Note:FORSE NN LA SVALUTAZIONE

Yellow highlight | Location: 258
In essence, this would mean letting the market determine the monetary base and the level of interest rates expected to lead to five-percent NGDP growth.
Note:PREDICTION MARKET

Yellow highlight | Location: 260
“the wisdom of the crowds.”
Note:Ccccccc

Yellow highlight | Location: 261
market forecast turned out to be far more accurate than the Fed’s forecast,
Note:VUONE PRESTAZIONI

Yellow highlight | Location: 266
Let a Thousand Models Bloom.”
Note:OGNUNO SIA LIBERO DI PREVEDERE

Yellow highlight | Location: 276
Futures targeting will not happen in the near future. But this thought experiment provides insights into what sort of policy would have worked last fall.
Note | Location: 277
AD OGNI MODO

Yellow highlight | Location: 279
recall the stabilizing speculation that occurs under a credible currency peg.
Note:RICORDATE COME LA SPECULAZIONE AIUTI LA BANCA CENTRALE IMPEGNATA SULLA PARITÀ

Yellow highlight | Location: 286
Concluding Remarks
Note:Tttttttt

Yellow highlight | Location: 289
a lack of money was causing or worsening many of our most pressing problems.
Note:LA FISSA DI SCOTT

Yellow highlight | Location: 291
It is especially important for free-market economists to never lose sight of the harm that can be done by deflationary monetary policies.
Note:X GLI AMANTI DEL MERCATO

Yellow highlight | Location: 292
public will end up blaming the free-market system.
Note:Cccccccc

Yellow highlight | Location: 293
Monetary policy is incredibly counterintuitive, with tight money often accompanied by low interest rates
Note:PURTROPPO

Yellow highlight | Location: 294
the public failed to see the role played by the Fed in the Great Depression, and instead blamed laissez-faire
Note:L EQUIVOCO DEL PASSATO

Yellow highlight | Location: 297
Only when Friedman and Schwartz showed that the Depression was a failure of government monetary policy, not laissez-faire, was free market ideology able to regain real intellectual respectability.
I SALVATORI DELLA PATRIA @@@@@@@